Ah, the Comp. It’s a word you’ll hear over and over again in real estate. Comp is short for comparable property, and it is how a real estate agent will arrive at a market value for your home. If you are the seller, your agent will use comps to arrive at a recommended list price. If you’re the buyer, your agent will use comps to help suggest a fair purchase price. You may think that sale price is the only factor when you’re looking at comps and trying to set a price for your listing. But it’s actually a bit more complicated. Here are five things that affect comps that you might not be aware of:
- New construction nearby: Because of low prices for lots and varying prices in home building materials, new homes can actually be cheaper and cost less per square foot than existing homes. If there’s a lot of new construction nearby, that can affect the price for your own listing. A seasoned agent can account for this by using comps that are closer in age to your property, and assessing the quality of the finishes in a new construction compared to the subject property.
- Renovations: Recently renovated homes typically sell for more than homes that haven’t been updated in a while. If you’ve recently upgraded your home–especially sought-after upgrades like the kitchen or master bath, your home should be priced appropriately.
- Developable lots: Not all lots are created equal. Even if the square acreage is the same, a lot that’s easily developable will get a better price than a hilly or rocky lot that needs a lot of preparation. In this same vein is the zoning of the property. If your lot is zoned for multiple dwellings, it can fetch a higher price than a single family dwelling.
- Listing price vs. sale price: Whether sellers actually get their asking price depends greatly on the market. When you’re pricing your home, it’s important to look at sales prices, not just listing prices. The listing price doesn’t always accurately reflect what a home will sell for. Be sure to take note of average list price vs sold price as well. If homes are consistently selling for over or under listing price, it can give you a good idea of what a fair market value would be.
- Location: Nearby amenities, safety, schools, and noise levels can vary greatly within a neighborhood. Homes in more desirable parts of the neighborhood will sell for a higher price, all else being equal. Walkability is usually a very desirable trait, and so proximity to amenities can be a boost your home’s value. Similarly, being on too-busy of a street can lower your home’s value compared to other homes.
At the end of the day, fair market value is the price a buyer is willing to pay and a seller is willing to accept for a property. The best way to get your home in front of the most qualified and serious buyers is to have a competitively and accurately priced home, something a seasoned real estate broker can help you with!